In February the Department of Labor (“DOL”) published a proposed rule implementing the mandate of Executive Order 13706 to require that all federal contractors provide paid sick leave to their employees. The rule will significantly impact government contractors. DOL estimates that the rule will require the provision of paid sick leave to over 800,000 contractor employees, over half of which currently have no such benefits at all. The rule will also require extensive recordkeeping and related tracking efforts for compliance and reporting purposes which will significantly increase administrative burdens for contractors at substantial cost. The proposed rule will apply to all contracts solicited or awarded after January 1, 2017. The key provisions of the proposed rule are as follows.
- Amount of Sick Leave: The rule requires that one hour of sick leave be provided for every thirty hours of work on covered contracts, for a minimum total of 56 hours per year.
- Covered Contracts: The proposed rule would apply to several categories of contracts, including construction contracts covered by the Davis-Bacon Act, service contracts covered by the Service Contract Act, concessions contracts, and contracts regarding federal property or lands and relating to services for federal employees, dependents, or the public.
- Covered Employees: The proposed rule covers employees performing under covered contracts and employees who spend 20% or more of their time at work on a week by week basis performing services that are “necessary” to covered contracts. Significantly, the proposed rule also covers employees exempt from the Fair Labor Standards Act and minimum wage requirements.
- Permissible Uses of Leave: Sick leave can be used for an employee’s own illnesses and preventative care, but also to care for spouses/partners, children, and parents. Sick leave can also be used to cover situations such as domestic violence, sexual assault, or stalking.
- Carryover and Payout: Under the proposed rule, employees must be allowed to carry over accrued sick-leave from year to year and such hours may not count against the following year’s minimum accrual of at least 56 hours. The rule, however, allows companies to cap the amount of accrued hours available, essentially stopping the accrual of additional hours until prior hours are used. Importantly, companies are not required to pay out unused hours at the time of employee termination, however, if the employee returns within one year, their leave must be reinstated.
- Certification and Liability: Contractors must pay heed to these compliance issues because the proposed rule would make compliance a condition of contract payment. Accordingly, noncompliance with these requirements could result in false claims related investigations or litigation, contract administrative penalties such as termination, as well as administrative sanctions, such as suspension, debarment, and mandatory disclosure obligations under the Federal Acquisition Regulation.
Given the serious consequences to compliance, contractors should ensure that they have the appropriate controls, procedures, and infrastructure in place to implement and comply with the proposed rule once it goes into effect. Contractors should also consider reviewing and modifying existing leave policies to ensure compliance with the new requirements. Additional information about the rule can be found here: here.